SAC Capital is initiating coverage on integrated marine logistics company Marco Polo Marine with a ‘buy’ call and target price of 3.2 cents.
This is up 5 cents from the counter’s 2.7 cent price on Jan 3, analyst Lim Shu Rong writes in a report.
Lim's 3.2 cent target is pegged to 8.0x FY2022 enterprise value to earnings before interest, taxes, depreciation, and amortisation ratio. This is the median for the offshore sector and close to that of ASL Marine – Marco Polo Marine’s closest peer.
The analyst's move comes as the company seeks out more opportunities in the Taiwan windfarm market.
For instance, Marco Polo Marine is looking to increase the number of vessels chartered to Taiwan from two to four by the end of the year. This is in line with Taiwan’s efforts to ramp up its offshore wind capacity to 15 GigaWatts by 2035.
The strict vessel requirements and higher barriers to entry will give Marco polo Marine an advantage over its competitors, notes Lim.
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The analyst adds that company’s reflagging exercise will give it an edge in scoring more wind farm projects – which offer 15% to 20% higher margins than the oil & gas projects it had traditionally focused on.
Meanwhile, Lim expects Marco Polo Marine to enjoy higher charter and utilization rates. This follows competing interests for offshore service vessels (OSV) from offshore renewables and decommissioning projects.
“We see further upside to charter rates and utilization rate with more investments in the pipeline,” says Lim.
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The analyst adds that favourable rates will further boost charter revenue and margin after close to 50% of the company’s vessels go for charter renewal by 1H2022.
However, Lim warns that Marco Polo Marine may have slower growth in its chartering revenue in 1H2022. This comes as the vessels which were previously working in the Taiwan wind farm are off-chartered till February due to the monsoon season.
"The vessels are due to return to work in February 2022, and [the company will have to] play catch up in the second half of 2022, with its 2 additional vessels planned to be deployed to service Taiwan wind farms," explains Lim
In any case, the analyst expects Marco Polo Marine to take on more contracts once the expansion of its dry dock is completed by January.
Currently the utilisation rate of its three dry docks is at 86%. The expansion will bring a further expansion of around 20%.
Going forward, Lim believes the company is in good stead given its net cash position of $16.1 million despite having taken on a temporary bridging loan of $5.0 million.
Shares in Marco Polo Marine closed flat at 2.8 cents on Jan 4.
Cover image: Marco Polo Marine
